Bangladesh’s economy is trapped in a deepening cycle of high interest rates, persistent inflation, weak investment and slowing GDP growth, making it increasingly difficult to revive private-sector activity, economists warned on Thursday.
Speaking at a Policy Research Institute (PRI) event in Dhaka, experts said the country’s financial system is experiencing its most severe strain in decades, with non-performing loans (NPLs) now accounting for 35.7% of total lending. They argued that the mounting volume of bad loans is tightening liquidity, driving interest rates higher and amplifying inflationary pressure.
The remarks were delivered at the launch of the October edition of Monthly Macroeconomic Insights, produced by PRI’s Centre for Macroeconomic Analysis. Former National Board of Revenue chairman Nasiruddin Ahmed, North South University professor AKM Atiqur Rahman and Bangladesh Chamber of Industries (BCI) president Anwar-ul-Alam Chowdhury were among those addressing the session.
PRI lead economist Ashikur Rahman presented the keynote, highlighting what he described as entrenched irregularities and mismanagement in the banking sector. PRI chairman Zaidi Sattar, who chaired the discussion, urged policymakers to study how other countries navigated the 1997 Asian financial crisis and the 2008–09 global crash in order to craft solutions to Bangladesh’s current macroeconomic challenges.
BCI’s Anwar-ul-Alam characterised the economy as “bleeding” and warned that private-sector operators were under extraordinary pressure. He described the situation as “very unfortunate” and accused the interim government of neglecting the business community. He added that sectors tied to infrastructure and construction — including steel, cement and brick manufacturing — had been hit hard by sluggish development spending, with only 8.33% of the Annual Development Programme delivered in the first four months of FY ’26.
Ashikur Rahman said the banking sector was facing its most difficult period in modern Bangladesh, with NPLs climbing to Tk 6.4 trillion — more than 35% of all loans — and distressed assets on track to reach Tk 9.5 trillion, equivalent to over 60% of total lending. A prolonged environment of high interest rates and high inflation would continue to deter investment if the NPL crisis remained unresolved, he cautioned.
He noted that tighter liquidity conditions and recent policy-rate increases had helped pull inflation down to a 39-month low. However, he warned that inflationary pressure could intensify again in the coming months as public spending picks up, consumer demand strengthens and supply-chain risks re-emerge.
